The Perfect Annuity

“Inflation is as violent as a mugger, as frightening as an armed robber, and deadly as a hitman.” That was Ronald Reagan in 1980 when he took over the economy, when interests rates were 13-1/2%. During the decade of the 70s and 80s, up until ‘81, interest, inflation averaged 7-1/2%, which is crazy. That means the costs of goods in a 10-year time frame doubled. We hadn’t had inflation for a long time but it will come again.

And the reason I want to talk about inflation and investing is because it is a super important part of investing. And most of us don’t really count for that. And one of the things we’ve been told through investing is that it’s a good way to – why you invest in stocks is one way to mitigate the cost of inflation. It is just kind of what said and it’s wrong. Because that works until it doesn’t. So if you’re earning in a portfolio of 5, 6, 7% a year and then all of a sudden go through a 2008 and you lose half your money, well that really didn’t help you with inflation, did it?

So one of the things that we focus on is how do we safely increase our income in retirement. And I call this the Perfect Annuity. I’m writing – this is a chapter in my new upcoming book with Jack Canfield called Momma’s Secret Recipe on a Successful Retirement. And it’s called the Perfect Annuities, this chapter. And I call it that, which I made up – I may trademark that, that’s a good slogan, “The Perfect Annuity” – is that it allows you to also have guaranteed lifetime income but also get increases in your income for inflation purposes. And very few people know about this, and it’s something we use as a foundation for planning.

Not only do you want income to last for the rest of our life but also it’s going to give us the opportunity to keep up with inflation. As I mentioned, inflation ran rampant, as most of you know that lived through this time in 70s, was double digits and high single digits. So there’s multiple ways that we use this strategy. And I’m going to give you the most straight forward – there’s three different ways this is credited.

Just think of it this way. So what happens is you’re going to get credit. So let’s just say you have $100,000 in an annuity. And every time there is a positive return in the market this is tied to you’re going to get that increase in your income. For instance, if the market went up 5%, this index went up 5%, you get a 5% increase. If the market goes down 20, you don’t get an increase that year.

So instead of getting the rate of return, that rate of return transforms into an increase in income. So it grows based upon the value of that index but once you take income that increase is going to increase your income. So I’m going to use like 3% to make it simple. It could be lower than that. It could be higher than that. But I’m going to use that as an example.

So if you had $100,000 in your account, and your one in the market was up 5% for this index, you got 3. If the market is up the next year 10%, you get 3. If the market is down 20%, you get zero. So over the first three years, you got two 3% increases in your invests, in your income. And over a 20-year period from age, let’s say, 60-80 that would basically be almost doubling your income. That’s pretty significant.

So I just did a case for a client that has a net about million dollars. And we used half of it for income purposes. In this case we just used an annuity. There’s other ways. And they were going to receive $20,000 a year for life from this income annuity. So we put them in the increase-in- income annuity and from age 60 to age 80, basically, their income almost doubled. And we need that. That’s just earning 3-1/2% per year will actually double your income over basically a 20-year time frame.

So over that 20-year period, it’s a little less than double but the fact is we need that kind of safe income and increase in income. And when I talk to clients about this, they’re just very surprised that you can do this type of planning. So not only do we get this increase in income, the best part is it is like a pension.

So we always do what’s called joint life expectancy. What that means is if, let’s say, it’s your husband IRA and he has $500,000 and we put this money into an annuity, and you’re getting $20,000 a year for the rest of your life and also we’re going to increase in income, which almost doubles in 20 years. Guess what? If you precede your wife, she gets the same amount of money. The same increases. And if there is enough money left over, your children get that.

Because one of the biggest knocks on annuities is 1) That your insurance company will receive your money. They are the beneficiary of your money. This is not true with most annuities. And secondarily, does that income pass onto your spouse?

I’m giving you a real important investment strategy. We want to increase-in-income annuity. I call it the Perfect Annuity, and it’s in the chapter of my new book. And if you want to reach out to me and talk more about this, just call us at (858) 597-1966!

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Julie Reyes is Chief Financial Officer and Chief Compliance Officer with Reyes Financial Architecture, Inc., a Registered Investment Advisory Firm specializing in portfolio risk management strategies, retirement income distribution and generational wealth planning. Julie is a Certified Public Accountant (Inactive) and a California Real Estate Broker. She also holds multiple licenses in the insurance and financial services fields. Julie graduated from Pennsylvania State University, with distinguished honors in 1997 and began her career with Price Waterhouse, LLP that year specializing in tax and audit. She became a California Real Estate Broker in 2002. Julie has worked with David and Reyes Financial Architecture since the company’s inception, and uses her financial background and expertise to help a wide range of clients protect their assets, minimize their tax liabilities and maximize their cash flow.

David Reyes is the Founder of Reyes Financial Architecture, Inc., a Registered Investment Advisory Firm specializing in portfolio risk managed strategies, retirement income distribution planning and social security planning. David works in collaboration with CPA’s, attorneys and other money managers to ensure that all planning is not only implemented but also integrated. This collaborative team approach seeks to ensure the highest probability of success.

David has been an advisor for over 20 years and holds multiple licenses and registrations in the financial, real estate, and insurance fields. David is featured in many magazines such as “Kiplinger Personal Finance Magazine,” “Boomer Market Advisor,” and is co-author of four books on estate and retirement planning. David’s latest book “The Little Red Book of Retirement” has recently been released. Currently David is working on a new book entitled, “Momma’s Secret Recipe to a Successful Retirement” with Jack Canfield. David advises many professional and public groups including CPA’s and Attorneys on retirement, taxes, estate planning, and asset protection. David is also the host of “The Retirement Architect Radio” heard every Saturday on 1210 AM KPRZ.

David is a distinguished graduate from UCLA’s Personal Financial Planning program and is a graduate of e Wharton Business School in their Retirement Income Planning Certification program. David has also been named 2015 Advisor of the Year by the National Social Security Association (NSSA) for his advocacy to educate retirees on maximizing their retirement income.

David and Julie have been blessed with three wonderful children, Morgan, Taylor and young David Reyes, III. David’s hobbies include Tennis, Church fellowship and spending time with his family.

Julie Reyes is Chief Financial Officer and Chief Compliance Officer with Reyes Financial Architecture, Inc., a Registered Investment Advisory Firm specializing in portfolio risk management strategies, retirement income distribution and generational wealth planning. Julie is a Certified Public Accountant (Inactive) and a California Real Estate Broker. She also holds multiple licenses in the insurance and financial services fields. Julie graduated from Pennsylvania State University, with distinguished honors in 1997 and began her career with Price Waterhouse, LLP that year specializing in tax and audit. She became a California Real Estate Broker in 2002. Julie has worked with David and Reyes Financial Architecture since the company’s inception, and uses her financial background and expertise to help a wide range of clients protect their assets, minimize their tax liabilities and maximize their cash flow.

David Reyes

Founder, Chief Financial Architect David Reyes is an Investment Adviser Representative with Reyes Financial Architecture, Inc., a Registered Investment Advisory Firm specializing in portfolio risk management strategies, retirement income distribution and social security planning. He specializes in working with families and business owners by helping them achieve their personal and financial goals. As a fiduciary, David takes his role as an advisor personally and passionately. David works in collaboration with CPA’s, attorneys and other money managers to ensure that all planning is not only implemented but also integrated. This collaborative team approach ensures the highest probability of success. David has been an advisor for over fifteen years and holds multiple licenses and registrations in the fields of investment, real estate and insurance. He has been featured in many magazines and publications including Kiplinger’s Personal Finance and has been a contributing author in three books on estate and retirement planning. Currently, David is working on a new book, The Ultimate Retirement Blueprint, the 7 Secrets to a Stress-free Retirement. David can also be heard every Sunday at 9:00am on AM 760 KFMB on his weekly radio show, “The Financial Hour of Power”. David is a distinguished graduate from UCLA’s Personal Financial Planning program and is a graduate of The Wharton Business School in their Retirement Income Planning Certification program.